Pharmaceutical Policy in Armenia

Policy paper

1. Introduction

The pharmaceutical service of the Republic of Armenia
(RA), aiming to provide the population of the country with pharmaceuticals, as
well as appropriate services, has undergone fundamental changes during the last
10 years. There are visible achievements, however such basic goals of the
pharmaceutical service, as ensuring availability of essential pharmaceutical
products for the population, ensuring quality of medicines and their rational
use, have been attained only partly.

In spite of the fact that
official data on medicines consumption in Armenia is unavailable, the rough
estimates suggest that the total pharmaceutical expenditures on medicines
consist of less than 2500-3000 dramas or about 4 USD per capita per year
without taking into account the humanitarian assistance. A comparison with the
data of other countries demonstrates an extremely low level of medicines
consumption in Armenia. In OECD on average, the total expenditures on pharmaceutical
goods per capita were 188.2 and 239.7 USD in 1990 and 1996, respectively [2].
In 2000, the pharmaceutical expenditures in some of the Western European
countries exceeded 350 USD per capita, while in Central and Eastern Europe they
were mainly 20-100 USD (Romania and Albania have pharmaceutical expenditures
even less than 20 USD) [8].The
countries of Sub-Saharan Africa had the lowest recorded pharmaceutical
expenditures at 7.8 USD in 1990[11].

Many patients in Armenia lack an access to medicines they
need. A study, carried out by PADCO in November 2001, found out that only 81 %
of households, whose members were prescribed medicines, had an opportunity to
buy these [9]. The results of our study (August, 2002) show that 24% of all
households interviewed were unable to buy medicines, completely or partly.
Moreover, problems with access to medicines were reported not only by groups of
poor and very poor, but also a group of not poor households with average
monthly expenditures per person higher than 23 USD (the poverty line for
1998-1999) [5].

The supply of poor-quality and
unsafe medicines at the pharmaceutical market - also deserves attention. Cases
of revealing counterfeit and unregistered medicines in recent years reveal the
imperfection of a quality assurance system in Armenia. Similar situation is
observed in the markets for pharmaceuticals in other CIS countries requiring
complex intervention at different levels of the drug procurement system.

Irrational use of drugs is widespread, specifically an
inadequate prescribing patterns by doctors and an inadequate dispensing by
pharmacy staff, as well as inappropriate use by patients.

The described problems in the
field of the pharmaceutical service do not allow ensuring protection and to
improve health of the population of Armenia, and also lead to not
cost-effective use of very limited financial resources of the state and the
population.

The basic problems of
pharmaceutical service and their reasons are interconnected. The international
experience in the last 30 years has convincingly proved, that successful
solutions to effective management of drug supply can only be achieved on the
basis of a comprehensive approach and within a common framework [4, 15].
Proceeding from this, the WHO recommends “that all countries formulate and implement a comprehensive
national drug policy” [15].

The purpose of this paper is
discussing the key issues related to the pharmaceutical service in Armenia,
possible strategies to tackle the existing problems, and also present
recommendations on national pharmaceutical policy.

2. Problem description

2.1 Background
of the problem

2.1.1 Access to medicines

In 1992 the proclamation of independence of Armenia and
the transition to a new economic system required essential changes in the
pharmaceutical service. Significant increase of drugs prices, caused by
liberalization and a reduction of the public health care financing have led to
a sharp decrease in access to medicines for the population. The public pharmaceutical
expenditures planned in 1998-2002 are approximately equivalent to 0.5 USD per
year per capita [3, 10]. Moreover, it is recognized, that the real allocation
usually was much below than planned, in particular the real public health
expenditures in 1998 were about 70% and in 2000 – 50% of approved budget. In
comparison, in the OECD on average, the public pharmaceutical expenditures in
1996 was 137 USD per capita [2], in developing countries it is usually less
than 30 USD, and in 38 countries, it is less than 2 USD [16]. This shows that
the public financing of medicines in Armenia is at a level of the poorest
countries in the world. It does not allow providing even for the basic needs of
the population. It should be noted that not only the absolute figure of the
public pharmaceutical expenditures is low, but also the share of these
expenditures in the total health budget. Thus, in the period 1998–2002, the
financing allocated for centralized procurement of medicines, consisted of 4.6
up to 5.8 % of the total public health budget in Armenia. In OECD on the
average (1996), the share of pharmaceuticals is 10 % [2], in the Western
European countries (2000) – 10-20% [8], in Bulgaria - 18,4 % [12], in the Czech
Republic, Hungary, Greece and Portugal (1996) it was over 25 % [2], in many of
the NIS and the CCEE (2000) – more than 30% and in some cases – 50-60% [8].

It is clear, that at such level of public financing for
pharmaceuticals in Armenia it is impossible to meet the needs even of the most
vulnerable groups of the population and patients with priority diseases, such
as cancer, diabetes, tuberculosis, mental and some other deceases. Due to lack
of public financing in 2000 only 18.2% of the drug needs of patients with
priority diseases were met by providing them free-of-charge medicines purchased
centrally by the Ministry of Health. The vaccines, serums and medicines for
treatment of tuberculosis were not purchased by the Ministry of Health at all
and the demand for these products was met only partly through donations by
international agencies and other organizations outside Armenia. Public finances
spent for purchasing Cytotoxic drugs for treatment of cancer what is the second
most common cause of mortality in Armenia covered only 9.9 % of the required
sum [10].

Despite that the Soviet system of reimbursement, based on
free-of-charge or on preferential terms dispensing medicines from community
pharmacies to out-patients to cover particular vulnerable groups and specific
diseases and further direct compensation of these pharmacies, has never been
revoked, in fact it is not operating since the initial stages of the reforms
process. This resulted partially from the privatization of the public
pharmacies and the contracted public health care finance. Thus, patients can
receive free-of-charge only donated or centrally purchased for the Ministry of
Health (financed from the State Budget) products. These products were dispensed
to out-patients by the Ministry of Health’s special pharmacy, then by few
pharmacies, by the Cancer and some other policlinics and some physicians.

Furthermore, due to reduction of public health budget and
drugs prices increasing hospitals, being underfunded, were unable to provide
necessary medicines. Medicines and other pharmaceutical products, which in
former USSR were given to inpatients free-of-charge, began to be bought by the
patients mainly out-of-pocket.

2.1.2 Efficiency, safety, quality

The new economic approaches
required appropriate legislation and regulation documents, but their development
lagged behind and were deprioritised in the reform process. The Law “On
medicines" was passed only in 1998, more than 3 years after final draft
presenting to the Ministry of Health. It has since undergone criticism by
experts, including its authors, as in a process of debate many important
sections were modified.

Disorganization in the centralized system of drug supply
has lead not only to deficiency of medicines, but also to appearance at the
market of a number of drugs with unknown quality. The market for
pharmaceuticals was diversified and medicines began to be sold at the so-called
street "little tables", posing challenges for proper control quality.However, there are some
positive developments which made it possible to manage quality of medicines at
the pharmaceutical market by the end of the 1990s. These include creation of
drug registration system in Armenia in 1992, and since 1997 identifying the
requirements on renewal of registration of all medicines, formerly registered
in the USSR, and the introduction of licensing regimes for pharmaceutical
enterprises and regulations on import of drugs. According to the Agency on
drugs and medical technologies data, the control of imported pharmaceuticals
prevents the presence of poor-quality medicines (about 50 products per year) at
the market. As a result, the percent of unregistered medicines in the market
was reduced from 28 % to 3-4 % for the period 1996–2001 [6]. Nevertheless,
cases of selling medicines of unknown quality at community pharmacies are still
observed. There are products that have bypassed the official import channels
and others, produced in Armenia. Counterfeit medicines were also found among
the products received through humanitarian assistance. The problem of
counterfeit medicines exists all over the world, and during the last years
counterfeit and poor-quality medicines were found out in many countries of the
CIS.

The Certification system required availability of
certificate of conformance for products at pharmacies was introduced as a means
of certifying quality through the channel of distribution. However it was
cancelled very soon. This cancellation can be explained and is reasonable only
by the fact that actually it has never operated at wholesaler and pharmacy
level. As a result of absence in former USSR of the modern requirements to
organization of drug manufacturing, the industrial enterprises of that period
did not meet to the Good Manufacturing Practice (GMP) standards. According to
the Armenian Drug and Medical Technologies Agency, 2103 of registered in
Armenia on 1.03.2001 medicines were produced by manufacturers, which comply
with GMP and 600 – by those, which don’t comply [6]. Many manufactures continue
to produce medicines under the same conditions, which do not assure an
appropriate quality of products. Nevertheless, these medicines are less
expensive, and withdrawal of such products, both local and imported, from the
market, would result in deprivation of a large part of the population from
access to affordable medicines.

2.1.3 Rational use of medicines

Irrational use of medicines has
become aggravated in Armenia due to the hard socio-economic situation arisen in
the country. The lack of necessary medicines in hospitals and a low purchasing
power of the population has sometimes led to use of available and affordable
medication that is not necessarily represent the most appropriate treatment. An
extremely low and irregularly paid salaries have lowered the motivation of the
health professionals and worsened the quality of care. Availability of new
medicines at themarketand thepoor access to information about these has made it difficult for the
health professionals to maintain theirknowledge.

Due to introduction of system of
paid health services many patients are unable to visit medical establishments
and choose to practice self-medication, even in the cases of diseases requiring
confirmation of diagnosis and /or a supervision by a doctor. According to the data of the Drug Agency, 67%
of randomly selected citizens of Yerevan prefer self-medication and one of the
most used medicines is analgin (metamizolum) – drug withdrawn from market in
many countries due to a high risk [6]. Community pharmacies have begun
to sell without prescription practically all prescription-only medicines,
except for narcotic and psychotropic ones. The privatization of the former
state pharmacies and creation of a number of private community pharmacies and
kiosks, in the absence of adequate documents regulating both pharmacy practice,
and control of pharmaceutical establishments activity, have lead to reduction
in the quality of pharmacy services. There is little understanding of the new
role of the pharmacist in the health systemand little knowledge on the new standards ofpharmacy practice and the concept of pharmaceutical care that
have been recognized internationally.

2.2 The current situation

2.2.1 Access to medicines

Significantly increased
pharmaceutical expenditures are planed in the state budget for 2003, amounting
to about 1.7 USD per year per capita. This includes both primary and secondary
health care and reaches the unprecedented figure of 18.4 % of the total public
health budget. Despite that this financing will not cover all necessary
expenditure on medicines, it testifies to the recognition by the Government of
necessity of adequate financing for the pharmaceutical sector.

However, there is no price
regulation and this lead to cost escalation. Prices of many medicines are at
the level observed in OECD and have even more increased after withdrawing the
privilege on VAT for medicines in 2001. For example, price of Ciprofloxacin (Bayer/Germany) is very
high, when comparing with other countries, in particular among countries of
Europe and North America, where an information is available. In 2001, only in
Germany price of Bayer’s Ciprofloxacin was higher than in Armenia. In India
price of 100 units (500mg) of Bayer’s product was 15 USD, in Armenia – 371 USD.
Price of Simvastatin what is available in Armenia only as Zocor
(MSD/Netherlands) was at the middle level when comparing with other countries
(low price for this drug is observed only in India and Nepal where a cheap
generic is available). [10].

Calculations confirm, that cost of treatment is high and
frequently is inaccessible to the patients. For example, in 2002 an average
cost of treatment for hypertension (the 3rd stage), a very common
condition in Armenia, according to approved clinical guidelines equaled about
14 USD, that makes about 30 % of an average monthly nominal salary or 150 % of
an average monthly pension. An average cost of treatment using the cheapest
products according to a frequently used prescribing scheme was even higher at
about 37 USD (2001) [10].

The results of the households
survey (2002) show that many of them are unable to buy medicines, completely or
partially. Predictably, the ability of households to afford medicines varies
depended on their income. Percentages of households, who reported that they
were not able to buy medicines they needed, were 63.1% among those included in
the group called “very poor” (average monthly expenditures less than 14 USD),
22.2% - in the group of “poor” (average monthly expenditures less than 23 USD)
and 14.9% - in the group of “non pure” [5]. Another study from 2002 has
confirmed these results showing that more than 11 % of respondents could not
buy the necessary medicines, and 17% stated that they have bought medicines
with difficulties and will be unable to manage in case they need these again.

2.2.2 Efficiency, safety, quality

The "grey" market in pharmaceuticals continues
to exist in Armenia. This includes sale of products of unclear quality,
including drugs not registered in Armenia, which have entered the market
avoiding the official channels. The real situation in this area is not enough
known, as at present there is no requirement for certificates of conformance at
pharmacies and body responsible for inspection of pharmaceutical
establishments.

2.2.3 Rational use of medicines

Despite that there is a lack of research in this area
seeking to identify and measure the quality of prescribing, dispensing and use
of medicines, it is well-known that many factors leading to irrational drug use
currently exist. These are unrestricted availability of prescription drugs,
lack of independent information on medicines, prescribing patterns based on
existing from the Soviet period approach that freedom to prescribe and select
treatment scheme is the necessary condition and a right of physician and so
forth. In addition, some important interventions started, for example
introducing Drug and Therapeutic committees, Clinical Guidelines have little
impact and not led to expected outcome. Our survey show that observed Drug and
Therapeutic committees are in fact not operating. The Clinical Guidelines
adopted are unknown to or unaccepted by physicians interviewed as they believe
that new and more effective medicines have to be used. Lack of rules and
regulations, insufficient efforts on education aimed to change approach, poor
involving of target groups in developing and implementing strategies, as well
as absence of management and supervision systems are important reasons of
interventions failure.

The results of our survey (2002) show that there is a high
level of antibiotics consumption, in many cases prescribed not by a doctor, in
particular, 47% of antibacterial drugs,
sold from pharmacies, were prescribed not by doctor.30% of patients, asked for prescription
medicine, have not visited doctor. 25 % of injections, sold from pharmacies,
have also not been prescribed by doctor. It was confirmed that
pharmacists carry out not only generic, but also therapeutic substitution,
sometimes advising wrong medicines. The sale of medicines is often not
accompanied by providing the necessary information on their use. In addition,
there is no regulation on labeling and patient leaflet. The survey implemented
by PO DURG show that the content of label and patent leaflets for many
pharmaceuticals at market do not comply with WHO Recommendations and EU
Guidelines in this area.

Neglecting consumer education in
Armenia also causes the irrational consumption of medicines in Armenia.
However, the results of our survey confirm that patients are interested in
getting more information in the area of drug use and the majority of them read
leaflet before use a medicine.

3. Policy options

3.1 Access to medicines

Various approaches can be considered in order to improve
the present situation on access to medicines. Experts from the Ministry of economics
and finance have recommended maintenance of pharmaceutical expenditures
according to the 2003 increase. Proceeding increase of these financial
allocations could be another approach. The introduction of measures for
reduction of the unjustified wastes of drugs is also important. Introduction of
Health Insurance System is another approach to secure access to drugs.

Clearly maintenance of public
pharmaceutical expenditures at the present, or even a higher level, will not
allow ensuring an equal access of the population to medicines. Such a
conclusion can be made not only on the basis of comparison of the data on
public pharmaceutical expenditures in Armenia and other countries, but also by
calculations based on to what extent the drug requirement has been met by
centralized purchasing. In 2000, the Ministry of Health purchased medicines
capable to meet only 18 % of the needs, covering treatment of priority diseases
without taking into account the needs of vulnerable groups. Thus, even a three
or four-fold increase in the planned for 2003 expenditures will not allow to
satisfy the priority needs. Continuing the tendency of increasing the public
pharmaceutical expenditures seems to be essential. A lack of sufficient public
finances, always mentioned when discussing access to health care and medicines,
is not looked as a convincing argument, as even in 2003, when public health
expenditures are 1.5% of GDP and public pharmaceutical expenditures have
greatly increased, they represent only about 0.3 % of GDP, compared to 0.7% of
GDP in the OECD in 1996 with a tendency to grow [2].

Increase of public financing is necessary, but
insufficient measure. It is very important also to develop and introduce a
complex of measures intended to increase value for money and to reduce waste at
each stage [15]. Measures of cost containment are used in many countries and
improving cost-effectiveness would be extremely important for country with a so
limited budget such Armenia. Nevertheless, analysis of the situation allows to
see waste at all stages of drug management circle. For example, the results of
PO DURG study show irrational drug selection at centralized procurement, in
particular selection medicines outside the Essential drugs list. Irrational
prescribing of expensive medicines have been promoted by physicians interviewed
at local hospitals. Various measures could improve the situation, for example
following to operating principles of Good procurement practice will result to
cost-effectiveness of public expenditures at the centralized purchases. Very
different prices on the same product observed in various pharmacies even inside
of one town (in particular, Yerevan) testify about an obvious expediency of
introducing price regulation, in particular on marks-up.

Withdrawing the privilege on VAT
for medicines since January 1, 2001 has led to prices rising. However, this
increase was not as high as it was expected due to being partially smoothed out
by increasing of number of wholesalers, and, correspondingly, a stronger competition.
System of price regulation should be based on the results of a detailed
research, otherwise, the unreasonable restrictions will lead to closing the
pharmaceutical enterprises (wholesalers and pharmacies), reducing a competition
and temporary disappearance of a number of products from the market.
Restoration of the privilege on VAT would allow to pharmaceutical organizations
to increase their turnover. Under the conditions of price regulation introduced
and control of this regulation implementation, the privilege on VAT will led to
visible reduction of prices.

The introduction of drug
financing system based on health insurance, widely used in Western Europe, can
be perspective in Armenia only after increase of the incomes level of the
population and improvement of an economic situation in the country.

Thus, the complex approach
including both increasing public drug financing and introducing measures
intended to improve management and provide cost-effectiveness, is likely to be
the best reform strategy.

3. 2 Quality assurance

One of the basic elements of
quality assurance is the Good Manufacturing Practice (GMP). The expediency of
prohibition in RA manufacturing what does not comply with the GMP requirements,
has been extensively discussed. However, as a result of implementing such
requirement, all small-scale manufactures, including those carrying out
packaging, will be forced to be closed. Only 3 enterprises, build more-or-less
according to the GMP standards will be kept. Some medicines, for example the
widely used Tincture of Iodine, will have to be imported in packaged form, that
essentially will increase their cost.

The options of promoting
development of a local industry, in compliance with internationally accepted
standards, to ensure availability of good quality products at cheaper price in
the market and lead to closing down of old and poor quality enterprises is
certainly a good solution in the long run. Developing local pharmaceutical
industry would also be contributing to a national economy.Other important elements of quality
assurance are state inspection of all enterprises engaged in pharmaceutical
activity, andsystem of sanctions in
case of irregularities that could be effectively enforced.The creation of the detailed regulation
guidelines ensuring the objectivity and transparency of the inspection, may
lead to fall in cases of infringements, including selling of poor-quality
products. In the case these measures are not taken, a lowered during reforms
quality of pharmaceutical services will be not improved and will be not
developing further. However, it is necessary to be very careful when
introducing such regulatory framework in order not to diminish further the
credibility of the inspection process.

3.3 Rational use of medicines

An international experience
confirms that rational use of medicines can be achieved only through a
comprehensive approach to this issue. “A combination of strategies tailored to
the needs of the different groups and different environments is needed” [15].
According to the WHO recommendations in this area strategies to promote
rational drug use can be educational, managerial or regulatory. Analysis of the
local situation and problems identified confirms the necessity of combining
approach to achieve objectives stated in this area.

The main policy options to be
discussed in the area of rational drug use are the approach based on the
development of clinical guidelines leading to essential drugs list and
formularies and the approach based on refuse a concept of limited drugs list
and support freedom of physicians to prescribe any medicine. The first approach
is recommended by the WHO and used in many countries (Essential Drugs List in
developing countries and Formulary system in industrialized countries) confirming
its effectiveness. The second one was used in the former USSR and is the
keystone of philosophy for the majority of physicians in Armenia despite the
official acceptance of Essential drugs concept by the Ministry of Health since
1992.

The first option indicates the most cost-effective
therapeutic approach, on the basis of valid clinical evidence, while absolute
freedom in chousing treatment often lead to irrational drug use and related
medical and economic consequences. This has also been proven in Armenia. For
example, according to the results of study, carried out by the Agency on drugs
and medicines technology in order to identify rationality of antibiotic
prescribing, irrational prescribing of single dose was observed in 27.2% cases
and irrational prescribing of course dose - in 39.1% cases [6]. Surveys
implemented by PO DURG show that the minimal cost of treatment for pneumonia
(light or medium severity) according to clinical guidelines approved and based
on using inexpensive generics is about 1-2 USD (2002), while an average cost of
treatment according to a frequently used prescribing scheme based mainly on use
of new expensive antibiotics was much higher - at least 50 USD (2001) [10].

The first approach lead not only
to more rational prescribing, but also to a better supply of drugs and to lower
cost due to the following reasons: nationally agreed clinical guidelines are
based on valid clinical evidences and able to take into account national
peculiarities; training and information can be more focused; prescribers gain
more experience with fewer drugs; procurement, storage, distribution,
dispensing are easier with a reduced number of drugs; procurement of fewer
items in larger quantities results in more price competition and economies of
scale [15].

Thus, it is clear that the
approach based on concept of essential drugs is an appropriate one for the
current situation in Armenia. However, existing in the country experience of
proclamation of such a policy without its promotion confirms necessity of
developing not only a policy document, but also an implementation plan (master
plan) and its further monitoring and evaluation. Approval of the special
Program “On the essential drugs” specifying detailed activities, finances and
responsible agencies is required, otherwise, the idea of the limited number of
drugs will not be fully implemented in practice. It is confirmed by the fact
that although the first essential drug list was introduced in Armenia in 1992,
it has had little impact and many strategies and practical implications of the
essential drugs concept are still far from being well implemented.

An active promotion of the importance of rational drug use
among health professionals and population is also essential. This should
involve not only education and knowledge dissemination, but also, changing
philosophy in order to take into account not only the benefit, but also the
risks connected with the use of medicines. Otherwise the widely practiced
unreasonable use of medicines may result in undesirable consequences for the
health of the population, and also excessive costs burdening the system and the
health systems users.

4. Economic aspects

It is important to add, that the
introduction of strategies aimed to improve pharmaceutical service will require
further financial investments. However, if this is not done, the expenses will
be higher. Irrational drug use leads to an enormous waste of resources [15].
Use of poor-quality products or chaotic use of drugs could lead to some adverse
health consequences associated with higher cost of care. In the United States
expenditures on overcoming of consequences caused by misuse of medicines are in
the range of billions dollars per year. Lack of access to medicines at the
initial stages of illness can lead to increase in chronic conditions associated
with a more protracted treatment at a higher cost to the society in terms of
burden of disease and health system resources requirements.

5. Conclusions and recommendations

An extremely low level of both
public pharmaceutical expenditures and population incomes, under conditions of
high prices of pharmaceuticals place severe constraints on the population
accessto medicines. The existing
systems of quality assurance of products and inspection of the pharmaceutical
enterprises are not fully effective and cannot prevent completely the
appearanceof poor-quality medicines at
the pharmaceutical market. There is a lack of drive towards rational use of
medicines due to deeply rooted physicians and population preferences, training,
and ethos of medical treatment.Inappropriate use of medicines is likely to be an important factor in
failing to improve the health of the citizens in the best way, given the
available resources.

The basic recommendation on
this study are:

1.Approval of a National pharmaceutical policy document.

2.Introduction of an appropriate legislation, passing of a new
Law “On Medicines” and adapting the regulatory framework.

3.Development and approval of a dedicated Program on essential
drugs aimed at a broad introduction of the essential drugs concept.

4.Public pharmaceutical financing to be raised to 0.7 % GDP by
2009 but not less than 10 USD.

5.Development and introducing a system for drug price
regulation.

6.Development and introduction of a package of measures aimed to
reduce waste on medicines.

7.Re-introducing of a privilege on VAT payment for medicines.

8.Development of a local pharmaceutical industry in compliance
with GMP standards.

9.Creation of a control body responsible for inspection of
pharmaceutical enterprises in Armenia according to objective and transparent
principles. Such inspections should involve representatives of professional
associations and nongovernmental organizations (including those representing
consumers).

10.Introduction of Formulary system in medical establishments.

11.Promotion of the Good prescribing practice and rational drug
use and their inclusion in the curricula of health care professionals.

12.Organising campaigns aimed to educate the population in
appropriate use of pharmaceuticals.